Cross Border Lending: The Latest Revolution?

If you think of the major events of the 1990s, you may first think of the rise of New Labor, the unfortunate death of Princess Diana, or even the first Gulf War. It was also the decade of a silent revolution, one that has fundamentally changed our lives forever. When British scientist Tim Berners-Lee invented the world web, we surely didn’t realize how much it would affect everything in our lives, from the way we socialize and communicate, to the way we conduct and operate business.

The Internet was the gateway to globalization and its appearance paralleled other great technological advances. Before the end of the decade, we would all be surfing the web and calling our friends and colleagues with the latest mobile phones. In the financial services sector, however, little has changed. Granted, in recent years, we have been able to verify our accounts online and even pay our bills through secure websites, but we still rely heavily on our local banks or construction companies for everything from managing our day-to-day accounts to get a loan or mortgage. But things could be changing.

Under the latest proposed amendments to the Consumer Credit Directive, consumers will soon be able to search across the EU for the best loans. By applying a new standard format for calculating interest rates for loans and credit cards, EU diplomats and officials hope that consumers can easily compare rates and obtain EU loans without compromising their rights as consumers. This will be backed by strict rules on the minimum level of facts and figures that must appear in advertisements, and the information that must be provided to consumers when applying for credit.

What this means for you, the consumer, is the potential opening of new markets and opportunities. It is still too early and the rules need final approval from the European Parliament, but if plans go ahead and harmonization on lending is agreed between member states, then your local bank / mortgage society / lender could follow suit. many other companies. sectors and be part of a truly global operation.

However, there are potential challenges. Some banking organizations, such as the British Bankers Association and the UK Payments Association (Apacs) agree to the changes in principle, but are concerned that the infrastructure is not in place to make it work. For example, each member state has different privacy and debt recovery rules. In addition, there is no agreement on the amount of compensation that banks can require from clients who repay their loans earlier than agreed.

As a consumer, you may also have some reservations about obtaining a loan abroad. The advantage of going local is face-to-face contact or at least an easy phone call. With EU-wide loans, there may be language problems or limited personal contact. You may also be unsure whether the rules and regulations you understand in the UK market would apply to loans taken abroad.

These developments are still new, but the large differences in interest rates between EU countries could give you the opportunity to make big savings on a loan deal. But you also need to make sure you research this new and changing market thoroughly. Currently, cross-border consumer credit represents only 1% of the European total; this percentage is likely to increase in the coming years. If you want to be a part of this happy new world, make sure you do your homework first.